India runs on chai

India runs on chai

With over 36 outlets spread across Bengaluru and New Delhi-NCR, Chai Point is looking to capture a sizable share of the Rs. 20,000 crore market for a cup of leisure chai by ensuring a wonderful last mile customer experience

DIVYA M. CHANDRAMOULI

When Amuleek Singh Bijral founded Chai Point (as a part of Mountain Trail Foods Pvt. Ltd.) in 2010, his business premise was clear; India runs on chai. And as the founder-CEO of the Bengaluru-based tea retail chain reasons, no player has set the benchmark in this vast market, estimated at around Rs. 20,000 crore in India. Today, Chai Point serves a variety of tea at its 32 outlets spread across Bengaluru and four more in the New Delhi-NCR region. In this fiscal alone, he hopes to take the number of outlets to 50. “While we began our journey in Bengaluru; New Delhi and its surrounding regions, has the highest per capita consumption of tea in India and we would like to focus our expansion plans to tap this opportunity. Subsequently, we would also look to enter Maharashtra, Gujarat and Punjab,” says Bijral. To fund this expansion, Chai Point raised its Series-A to the tune of Rs. 10 crore from investment firm, Saama Capital, in May 2014.

While he was pursuing a management degree at Harvard Business School (2004-06) (HBS), Bijral nursed the ambition of building a consumer centric business. Post his masters, he spent over five years working in the IT industry and while on the job, his chai break was sacred, akin to a daily ritual. Bijral observed that he was only one of the many thousands who stepped out for a cup of tea at a nondescript tea stall. “Unlike what is happening with coffee there really was no last mile customer experience for tea and in India, the volume of tea consumption is nearly 14 times that of coffee,” explains Bijral. He sensed the huge potential that lay in this largely fragmented market and opened his first outlet in Bengaluru in 2011 using his personal capital. In a year’s time, angel investors came on board and this allowed the company to gain momentum.

Journey towards consistency

The cost of setting up a Chai Point outlet varies between Rs. 9 lakh to Rs. 18 lakh, depending on its location. A majority of its outlets are standalone while some are located in corporate offices. Chai Point also runs a kiosk at Bengaluru’s International Airport. Interestingly, all of Chai Point’s 36 outlets are self-owned. “In a retail business, unless you have set up over 100 outlets and built a universally successful model, it is pointless to bring on franchise partners,” says Bijral. Much like other retailers, Chai Point faces its own set of challenges including training and management of manpower, standardising product offering and tackling real estate costs. “Early on, we realised the importance of investing in our people, and set up the Mountain Trail Academy to impart training to all our employees,” says Bijral. As for building its team, the company looks to hire specialists in functions such as technology and supply chain while it is open to hiring people of varied backgrounds, as long as they are attitudinally aligned with Chai Point.

In terms of standardising its product offering and ensuring quality, Chai Point has invested in sourcing high quality produce and equipment. It has exclusive partnerships with estates in Assam, Darjeeling and Nilgiris to procure tea leaves that are free of artificial colours or flavouring. “In our journey towards consistency, we have had to pay attention to the smallest details; take water for instance, we have invested in industrial water softeners as using hard water significantly alters the output,” says Bijral while adding that the company uses sulphur free sugar in its tea. Commenting about the location, he says, “Initially, we looked for the cheapest real estate options. In time, we understood that it is essential to look at a location’s sales and cash flow potential and justify its cost accordingly,” he says.

While there are operational challenges to face, Bijral says that the tougher challenge is that of modernising the tea drinking experience while endeavouring to be a mid-market brand.

Packed and ready to go

In the next quarter of this fiscal, Chai Point aims to roll out its packaged products including a ready-to-drink iced tea, packaged tea bags and tea time snacks. At first, these products will be available at all of the company’s outlets and depending on sales volume, Chai Point will decide if it wants to further its reach through different distribution channels. As of now, to increase its footfalls, the company relies on word-of-mouth referrals and has in place a reward system. “Repeat business is one of the best aspects of our business and to encourage this we have issued pre-paid cards with up front discounts. While we first launched this system through a physical card, we soon figured that taking it to a mobile platform made great business sense,” says Bijral. At present, Chai Point’s reward system is available on Apple and android mobile platforms. The company has also introduced a home-delivery system in Bengaluru, earlier this year.

Bijral is quick to acknowledge that Chai Point has just made a start and has a fair way to go. “We have more than doubled our revenues, year-on-year, since our inception. I know that does not mean much since we are at an early stage but we certainly do have the potential to sustain such growth rates for a few more years,” he states. He also knows that with international players such as Starbucks believing that “tea is sexy”, there will be a concerted effort to organise the segment and make tea contemporary. In all, Bijral and Chai Point want to make all the right moves to ensure the cup’s brimming.


WHAT HARVARD BUSINESS SCHOOL TAUGHT AMULEEK SINGH BIJRAL

A LESSON TO REMEMBER 

I don’t think it’s the technical learning that is unique at HBS. Arguably, one could learn all of that stuff at any school. It’s the culture and belief system around entrepreneurial leadership that gets strengthened there. What I remember are the big themes that I heard often from some of my professors or some of the alumni. For instance, supposedly unsexy ideas are often the sexier ones – this was often reiterated by Prof. Narayan Das, our marketing professor. My personality was moulded during my days at HBS and it’s tough to capsulate it in a few sentences.

A LESSON TO UNLEARN 

Being involved in a nascent stage company is a holistic and very immersive experience. What works now will not work tomorrow. You revisit so many things you have learnt. You dump many of them and you modify many of them. The key here is that you are literate on the essential aspects of doing business and that is what an MBA helps with. The actual work gets done by on-the-job improvisation, learning and relearning.

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